Macy’s CEO takes stand in Macy’s-Martha Stewart case

New York -- Terry Lundgren, CEO of Macy’s, took the stand on Monday to testify in the trial of two Macy's lawsuits regarding the deal between J.C. Penney Co. and Martha Stewart Living Omnimedia Inc. The long-awaited trial began last Wednesday, in New York Supreme Court.



The trial is about whether Macy’s has the exclusive right to sell Martha Stewart branded cookware, bedding and certain other products.



Testifying, Lundgren said he was shocked when Martha Stewart, who at the time he considered a friend, called to tell him about her arrangement with J.C. Penney.



"I was completely shocked and blown away," Lundgren said. "I was literally sick to my stomach."



Under oath, Lundgren said Macy's had built the Martha Stewart brand to be the biggest in its home business. He noted that the department store company has spent 40% of its overall marketing on the Martha Stewart brand even though the home category represents 17% of sales.



"This is an extremely important brand and we are going to continue to highlight the brand in our stores," Lundgren said on the stand.



Lundgren said J.C. Penney having access to the brand will not be good for the business and will confuse shoppers.



Macy's sued Martha Stewart Living in January 2011, when the company signed a deal with Penney, which took a 17% in the brand. Macy’s alleges Martha Stewart Living breached a long-standing contract in entering into the J.C. Penney deal.



In a separate lawsuit, Macy's sued Penney. Macy’s argued that the chain had no regard for the Macy's contract and that CEO Ron Johnson had set out to steal the business. The two suits were consolidated for the current trial.



According to the AP, the crux of the issue apparently lies in a provision with Martha Stewart Living’s agreement with Macy's that allows Martha Stewart to sell goods in categories like bedding in Martha Stewart Living's own stores. Since the Macy's agreement doesn't say the goods can be sold "only in "stand-alone" stores, according to Martha Stewart Living, the branded Martha Stewart in-store shops in J.C. Penney stores do not fall under the exclusive agreement.



But as outlined in documents, Macy’s attorneys claim that it later found that J.C. Penney "knowingly and purposely demanded and received confidential information" from Martha Stewart Living about the contract of Macy's and crafted a deal that was more lucrative than the Macy's agreement.



J.C. Penney CEO Ron Johnson is scheduled to take the stand on Friday.